Notice: To view this week’s big picture outlook, click here.
What Happened: After a failure to resolve higher, ahead of the Federal Reserve’s policy decision and earning reports by mega-cap stocks, U.S. index futures sold heavy overnight.
What Does It Mean: During Tuesday’s regular trade in the S&P 500, market participants were unable to maintain prices above the $3,852.50 ledge, increasing confidence among responsive sellers.
What To Expect: Wednesday’s regular session (9:30 AM – 4:00 PM ET) will likely open on a gap, outside of prior-balance and -range, suggesting the potential for immediate directional opportunity.
Given that the market failed to drum up initiative buying after an upside break of the $3,852.50 ledge, in addition to profile structures denoting the presence of excess (which forms after an auction has traveled too far in a particular direction and portends sustained reversal) participants can expect increased confidence among responsive sellers.
Therefore, attention moves to the $3,824.00 – $3,763.75 balance-area.
Balance-areas denote range-bound trade. The longer participants spend time transacting within a narrow range of prices, the more valuable those prices become. Should the market initiate out of balance and return, participants left out in the move will respond as the area offers favorable entry.
Re-entry into the balance-area may portend further downside participation, as low as the $3,763.75 boundary. Participants should keep in mind that the area is valuable and will be the site of responsive buying. The near-term bullish narrative remains intact, as long as participants maintain prices above the $3,763.75 boundary. Trade beneath $3,763.75 would be the most negative outcome and may portend further downside discovery, as low as the $3,727.75 high-volume node (HVNode), a favorable area to transact in the past.
The go/no-go for upside is the $3,824.00 balance-area boundary. The go/no-go for downside is $3,763.75 balance-area boundary.
Above $3,824.00 puts in play the $3,852.50 ledge. Below $3,763.75, participants ought to look to the $3,727.75 HVNode.
Levels Of Interest: $3,852.50 ledge, $3,824.00 balance-area high, $3,763.75 balance-area low, $3,727.75 HVNode.